arXiv research

The paper analyzes optimal dealer strategies in agent-based market models.

Proposes a framework to adjust quotes for informational risk in markets with informed traders and price-revealing quotes.

A dealer manages quotes and rejection rules to control slippage risk in FX markets.

Paper explores MM strategies that can refuse to quote or provide single-sided quotes.

Study bond market making with hit-ratio target using optimal control and HJB equations.

The study compares on-chain option prices with a model and finds significant differences.

The paper shows how to calculate risk-neutral default probabilities from bid and ask CDS quotes.

We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the orderbook. This includes limit orders being placed outside of the spread, inside the spread and (effective) market orders. We find that limit …

We study the problem of the execution of a moderate size order in an illiquid market within the framework of a solvable Markovian model. We suppose that in order to avoid impact costs, a trader decides to execute her order through a unique trade, waiting for enough liquidity to accumulate at the best quote. We find tha…

Axiomatizes the bid-ask market maker's quoting rule

Study risk-sensitive market making with entropy regularization for better quote control.

This paper develops a method to select a reference contract for multi-contract quoting to minimize execution risk.

Unified theory for optimal execution through signal-adaptive quotes in limit order books.

ARL and Hawkes processes improve market-making strategies with variable volatility.

The paper calibrates a model to market quotes efficiently and arbitrage-free.

We investigate the statistical properties of the EBS order book for the EUR/USD and USD/JPY currency pairs and the impact of a ten-fold tick size reduction on its dynamics. A large fraction of limit orders are still placed right at or halfway between the old allowed prices. This generates price barriers where the best …

Study uses SABR model to create implied volatilities from sparse quotes.

The definition of time is still an open question when one deals with high frequency time series. If time is simply the calendar time, prices can be modeled as continuous random processes and values resulting from transactions or given quotes are discrete samples of this underlying dynamics. On the contrary, if one take…

In this paper, we develop a Markovian model that deals with the volume offered at the best quote of an electronic order book. The volume of the first limit is a stochastic process whose paths are periodically interrupted and reset to a new value, either by a new limit order submitted inside the spread or by a market or…

New models optimize quotes for automated market makers considering various price dynamics and demand variability.

Two price regimes identified in limit order books: close and far from quotes.

We examine the Foreign Exchange (FX) spot price spreads with and without Last Look on the transaction. We assume that brokers are risk-neutral and they quote spreads so that losses to latency arbitrageurs (LAs) are recovered from other traders in the FX market. These losses are reduced if the broker can reject, ex-post…

We study the natural Kähler metrics on moduli spaces of stable oriented pairs in a very general framework, and we prove a universal formula expressing the Kähler class of such a moduli space in terms of characteristic classes of the universal bundle. We use these results to compute explicitly the volumina of certain Qu…

This paper develops a model of liquidity provision in financial markets by adapting the Madhavan, Richardson, and Roomans (1997) price formation model to realistic order books with quote discretization and liquidity rebates. We postulate that liquidity providers observe a fundamental price which is continuous, efficien…

We present a non-parametric method to estimate the discount curve from market quotes based on the Moore-Penrose pseudoinverse. The discount curve reproduces the market quotes perfectly, has maximal smoothness, and is given in closed-form. The method is easy to implement and requires only basic linear algebra operations…

The paper uses XAI to predict RFQ fulfillment accuracy.

Study Nash competition among dealers quoting prices to clients with unknown trading motives.

Optimal market making improves liquidity in prediction markets.

ClauseLens uses reinforcement learning to price reinsurance treaties transparently and auditably.

We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price fluctuations caused by individual market orders are essentially independent of the v…

A large proportion of market making models derive from the seminal model of Avellaneda and Stoikov. The numerical approximation of the value function and the optimal quotes in these models remains a challenge when the number of assets is large. In this article, we propose closed-form approximations for the value functi…

Modeling market makers' quoting strategies to understand price impact.

VolNP learns IVS from sparse quotes via meta-learning and SABR priors.

This study examines non-retail trading on Polymarket, revealing unique behavior patterns and structural limitations.

Market makers continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency at which they indeed provide liquidity, is challenged by the price risk they bear due to their in…

A model-free framework extracts risk-neutral densities from short-dated options.

We present a detailed analysis and implementation of a splitting strategy to identify simultaneously the local-volatility surface and the jump-size distribution from quoted European prices. The underlying model consists of a jump-diffusion driven asset with time and price dependent volatility. Our approach uses a forwa…

For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and accommodate basis-swap spreads, whose remarkable widening can no longer be neglecte…

We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to deal with the limited number of options quoted in the market. Cleared commodity …

Non-spanning identification of scheduled event risk in option pricing.

In most OTC markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting optimization problem: they need to choose bid and ask prices for making money while …

Let $X$ be a compact connected Riemann surface of genus $g$, with $g \geq 2$, and let ${\mathcal O}_X$ denote the sheaf of holomorphic functions on $X$. Fix positive integers $r$ and $d$ and let ${\mathcal Q}(r,d)$ be the Quot scheme parametrizing all torsion coherent quotients of ${\mathcal O}^{\oplus r}_X$ of degree …

Paper generalizes balanced metrics existence to singular cases using Quot-scheme limit.

The paper proposes a new algorithm for dealer markets that incorporates hedging and market impact.

An analysis of the Japanese credit market in 2004 between banks and quoted firms is done in this paper using the tools of the networks theory. It can be pointed out that: (i) a backbone of the credit channel emerges, where some links play a crucial role; (ii) big banks privilege long-term contracts; the "minimal spanni…

For a holomorphic vector bundle $E$ over a polarised Kähler manifold, we establish a direct link between the slope stability of $E$ and the asymptotic behaviour of Donaldson's functional, by defining the Quot-scheme limit of Fubini-Study metrics. In particular, we provide an explicit estimate which proves that Donaldso…

We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the market maker quotes the prices such that by taking the other side of the invest…

In this paper, we propose a new method for estimating the conditional risk-neutral density (RND) directly from a cross-section of put option bid-ask quotes. More precisely, we propose to view the RND recovery problem as an inverse problem. We first show that it is possible to define restricted put and call operators th…